Azim Premji: Failure is Essential

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Failure is an essential part of the innovative process, Azim Premji, chairman of the Indian outsourcing giant Wipro Technologies, told a Business School audience.

"It is impossible to generate a few good ideas without a lot of bad ideas. Failure should be forgiven and forgotten quickly," he said during his Oct. 27 visit. Premji's talk was part of the School's "View From The Top" speaker series.

Premji, who over the course of a 40-year career helped transform Wipro from a family-owned vegetable oil business (Western India Vegetable Products Ltd.) into one of the largest outsourcing companies in the world, said failure is a critical ingredient in innovation. He added that innovation is what enabled young startups to upset the existing balance of power.

To that end, companies must deliberately design a culture of innovation to actively seek feedback from customers, celebrate all kinds of diversity in their workforces, and also foster an environment in which workers feel safe taking risks, even when they fail.

"In every market, at every juncture, there are significant scale advantages that make the largest companies appear invincible. Yet time and time again, upstart technologies create disruptions and they change the rules of the game," said Premji. He used the example of Skype, which became the first company to offer voice-over-Internet phone services on a broad scale years after all the established phone companies had started talking about the process.

Premji is widely recognized as the innovative business leader who shifted his company "from Crisco to computers." That gradual evolution started during the 1970s, when IBM exited the Indian market, leaving more room for local computer manufacturers. Wipro began assembling its own machines and later set itself up as a provider of computer and IT services to global firms operating in India. Years later, as computers became more commoditized, Wipro again shifted to a stronger focus on servers and offered global R&D labs for hire, where a range of Western high-tech and consumer products companies could conduct critical research at a lower price.

A graduate of Stanford's engineering school, Premji said that real progress comes as much from changing behavior as it does from inventing new products. "Creativity is about making new things. Innovation is about doing new things," he explained.

Today, Wipro is the world's largest independent R&D services provider. But at a time when many Westerners are skeptical about offshore outsourcing, Premji's discussion offered some perspective on the long history and innovation that led up to the current state of the outsourcing business.

Asked about the political or economic implications of moving so many jobs overseas, he was quick to defend outsourcing as an industry that benefited Western businesses as much as it did companies in India.

"Please don't underestimate the trends," he said. "Western culture is not encouraging students to go into engineering, and those who do usually do not want to go into computer science. … Outsourcing is inevitable," he continued, "not so much because of cost arbitrage but rather because of talent arbitrage."

One telling statistic he offered was the dramatic change in worker movements when they left his company. Although Wipro has consistently had an annual attrition rate of 13 to 14 percent, just four years ago almost all of the workers who left were departing for jobs in the United States. Today that trend has completely reversed itself, with only 1 percent of workers leaving Wipro for jobs with U.S. companies.

"There had been a trend of professionals going to the U.S. in an effort to make a lot of money. But now people are wanting to come back to India," he said, noting that the same trend applied in other developing countries like China.